You can’t say we didn’t warn you.
While most news accounts said Social Security will dip into its trust fund this year for the first time since 1982, The Hill’s Merrill Matthews points out that there is no trust fund, because the federal government has borrowed that money and spent it.
Historically, workers have paid in more than was needed to cover benefits, allowing the trust fund to grow to $2.9 trillion — at least on paper. However, the federal government has borrowed the trust fund surplus to cover other government expenses, depositing interest-bearing IOUs in its place.
If Social Security must pay out more than it receives, which the trustees say will happen this year for the first time since 1982, the government cannot draw from other assets because it doesn’t have any. Indeed, the federal government has to borrow hundreds of billions of dollars every year just to cover its current expenses.
Thus the government must borrow the money — or raise taxes — to redeem its IOUs so Social Security can pay benefits.
A certain prescient politician warned us in 1990 while standing in from of a sign reading “embezzlement”:
“It is time for Congress, I think, to take its hands — and I add the president in on that — off the Social Security surpluses. Stop hiding the horrible truth of the fiscal irresponsibility that we have talked about here the past two weeks. It is time to return those dollars to the hands of those who earned them — the Social Security beneficiaries and future beneficiaries. … I think that is a very good illustration of what I was talking about, embezzlement, thievery.”
That was Harry Reid. The same Nevada senator who years later said, “Unfortunately, despite decades of success, many Republicans continue to threaten the future of Social Security. Republican leaders routinely exaggerate the financial challenges facing the program in an effort to create a false sense of crisis. … I have spent my career fending off attacks against Social Security.”
Actually, Social Security is and always has been a Ponzi scheme, depending on future “investors” to pay off the original “investors.” That worked so long as there were 40 workers for every retiree, but does not work so well when the ratio of workers to retirees nears two-to-one.